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6/28/2006
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3Com To Cut 250 Jobs, Reports Narrower Q4 Loss

The downturn will force a restructuring that will include layoffs, the shuttering of 21 sites, and a revamp of spending in sales and marketing.

3Com Wednesday reported a narrowed fourth-quarter loss and unveiled a restructuring plan that will result in 250 job cuts.

The restructuring hits 3Com's Secure, Converged Networking (SCN) operating segment and does not impact the vendor's Huawei-3Com joint venture or its TippingPoint security business, said Scott Murray, president and CEO of 3Com, Marlborough, Mass., during a conference call. Instead, 3Com plans to add headcount to those latter two groups, he said.

The 250 full-time job losses will primarily come in the sales and marketing organizations of 3Com's SCN business, resulting in a reduction of SCN's headcount by about 15 percent.

At the same time, 3Com plans to refocus its spending in sales and marketing, Murray said. "We are taking a thorough look at how to spend our resources and create programs that provide greater returns on our investments," Murray said.

3Com also plans to close 21 sites globally, including the closure of its former headquarters in Santa Clara, Calif., he said.

"As any global company, we recognize the importance of having local presence in various countries. However, after analyzing our global footprint carefully, we determined that we could close or consolidate a number of these offices around the world and still effectively service our customers," Murray said. The three buildings 3Com owns in Santa Clara will be put up for sale, he said.

The moves will result in restructuring charges of $10 million to $13 million and come as part of Murray's efforts to return the company to profitability and build more efficiency into 3Com's operating model.

3Com's channel strategy is seen as an area of potential growth, Murray said.

"In the midmarket, 3Com will continue to target customers in key verticals, such as education, government [and] healthcare. We have a strong base of channel partners with experience selling within these verticals, and these are areas where we see potential for growth, particularly with this focused approach," Murray said.

For the quarter ended June 2, 3Com reported a loss of $15 million, or 4 cents per share, which included charges of $13 million, or 3 cents per share. The loss narrowed compared to the same quarter a year ago, when 3Com reported a loss of $58 million, or 15 cents per share, which also included charges of 3 cents per share.

Revenue for the quarter climbed to $255.3 million, up approximately 45 percent from $176.6 million a year ago.

Financial analysts expected the company to report a loss of 4 cents for the quarter, according to Thomson Financial/First Call.

For the full fiscal year, 3Com reported a loss of $101 million, or 26 cents per share, compared to a loss of $196 million, or 51 cents per share in fiscal 2005. Revenue for the year climbed 22 percent to $794.8 million, up from $651.2 million in fiscal 2005.

Shares of 3Com Wednesday closed up 4 cents at $4.43 prior to the announcement.

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